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Glossary of Terms |
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Glossary of Terms
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Debt-to-Income Ratio
The relationship between a borrower's total monthly debt
payments (including proposed housing expenses) and his
or her gross monthly income; this calculation is used in
determining the mortgage amount that a borrower
qualifies for.
Deed
The legal document conveying title to a property (i.e.,
transferring the ownership of real property from one
party to another.)
Deed-in-Lieu of Foreclosure
The transfer of title from a borrower to the lender to
satisfy the mortgage debt and avoid foreclosure. Also
called a "voluntary conveyance."
Deed of Trust
A legal document that conveys title to real estate to a
disinterested third party (a "trustee") who holds the
title until the borrower has repaid the debt. In some
states, this document is used in place of a mortgage.
Default
The failure to make a scheduled payment or otherwise
comply with the terms of a mortgage loan or other
contract.
Delinquency
Failure to make a payment when it is due. The condition
of a loan when a scheduled payment has not been received
by the due date, but generally used to refer to a loan
for which payment is 30 or more days past due.
Discount Point
A fee paid by the borrower at closing to reduce the
interest rate. A point equals 1 percent of the loan
amount.
Due-on-sale Clause
A provision in a mortgage that allows the lender to
demand repayment in full of the outstanding balance if
the property securing the mortgage is sold.
Earnest Money Deposit
A deposit submitted with a purchase offer to show that
the buyer's offer is being made in "good faith."
Easement
A right to the use of, or access to, land owned by
another.
Encroachment
The intrusion onto another's property without right or
permission.
Encumbrance
Any claim on a property, such as a lien, mortgage or
easement.
Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders to make credit
equally available without regard to the applicant's
race, color, religion, national origin, age, sex, or
marital status; the fact that all or part of the
applicant's income is derived from a public assistance
program; or the fact that the applicant has in good
faith exercised any right under the Consumer Credit
Protection Act.
Equity
The owner's interest in a property, calculated as the
current fair market value of the property less the
amount of existing liens.
Escrow
An item of value, money, or documents deposited with a
third party to be delivered upon the fulfillment of a
condition. For example, the deposit by a borrower with
the lender of funds to pay taxes and insurance premiums
when they become due, or the deposit of funds or
documents with an attorney or escrow agent to be
disbursed upon the closing of a sale of real estate.
Escrow Account
An account that a mortgage servicer establishes on
behalf of a borrower to pay taxes, insurance premiums,
or other charges when they are due. Sometimes referred
to as an "impound" or "reserve" account.
Exclusive Listing
A written contract that gives a licensed real estate
agent the exclusive right to sell a property for a
specified time.
Fair Credit Reporting Act
A consumer protection law that regulates the disclosure
of consumer credit reports by credit reporting agencies
and specifies procedures for challenging errors on a
credit record.
Fair Market Value
The price at which property would be transferred between
a willing buyer and willing seller, each of whom has a
reasonable knowledge of all pertinent facts and is not
under any compulsion to buy or sell.
Fannie Mae
A New York stock exchange company. It is a public
company that operates under a federal charter and is the
nation's largest source of financing for home mortgages.
Fannie Mae does not lend money directly to consumers,
but instead works to ensure that mortgage funds are
available and affordable, by purchasing mortgage loans
from institutions that lend directly to consumers.
Federal Housing Administration (FHA)
An agency within the U.S. Department of Housing and
Urban Development (HUD) that insures mortgages and loans
made by private lenders.
FHA-Insured Loan
A loan that is insured by the Federal Housing
Administration (FHA) of the U.S. Department of Housing
and Urban Development (HUD).
First Mortgage
A mortgage that is the primary lien against a property.
Fixed-Period Adjustable-Rate Mortgage
An adjustable-rate mortgage (ARM) that offers a fixed
rate for an initial period, typically three to ten
years, and then adjusts every six months, annually, or
at another specified period, for the remainder of the
term.
Fixed-Rate Mortgage (FRM)
A mortgage loan in which the interest rate does not
change during the entire term.
Flood Certification Fee
A fee charged by independent mapping firms to identify
properties located in areas designated as flood zones.
Flood Insurance
Insurance that compensates for physical property damage
resulting from flooding. It is required for properties
located in federally designated flood hazard zones.
Foreclosure
The legal process by which a property that is mortgaged
as security for a loan may be sold and the proceeds of
the sale applied to the mortgage debt. A foreclosure
occurs when the loan becomes delinquent because payments
have not been made or when the borrower is in default
for a reason other than the failure to make timely
mortgage payments. |
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